The town of Kyaukpyu, nestled around a small fishing port on the Bay of Bengal, has the air of a place expecting to get rich soon.
In the seaside market, stalls of seafood unloaded from wooden fishing boats floating in the rubbish-strewn harbor have been joined by stacks of Chinese-made toys and smartphones. Nearby, cattle graze between building sites as high-rise offices and hotels replace weather-stained bungalows. Fine-dining rooftop restaurants and a golf course underline the sense of transition.
“The real danger of the port is that its extreme expense could lead the Myanmar government to take out an unsustainable level of debt,” said Greg Poling, director of the Asia Maritime Transparency Initiative, at the Center for Strategic and International Studies in Washington. “That, in combination with other current and future projects in Myanmar, could in the coming years lead to a debt trap.”
Those concerns have stalled development since the previous military government chose China’s CITIC Group to build the port three years ago. CITIC, China’s first state-owned investment corporation, has proposed taking a 70 percent stake in the project, with the remainder split between the Myanmar government and a consortium of local firms. The Chinese company would run the zone for up to 75 years and would finance Myanmar’s stake.
“We keep hearing it will be built since 2015, but nothing has happened so far,” said Shwe Shwe Maung, 34, the head of KaBalan, a village of 460 households in the area marked for the economic zone. “We don’t know exactly what the impact will be, but we’re all hoping that it will bring jobs.”
Some senior government officials are concerned that a nation with a smaller economy than the Dominican Republic may struggle to service and repay the billions of dollars Myanmar would need to borrow for the project.
“The amount of interest is quite substantial, and not like the loans we got from the Japanese government—the loans from China are much more expensive,” said Soe Win, a member of the ruling National League for Democracy’s central economic committee and a candidate to become Myanmar’s next central bank governor. He declined to give details of the proposed loan.
The Japan International Cooperation Agency is helping finance a $3.28 billion economic zone at Thilawa port, south of Yangon. The Thilawa development has raised further questions about Myanmar’s need for such a large facility in Kyaukpyu (pronounced CHOW-pew) or whether it would simply be a conduit for China, run by Chinese companies.
“Is this deep-sea port being made to benefit Myanmar?” said Ken Tun, founder and chief executive of Myanmar’s Parami Energy, the only local firm to be shortlisted for the development. “If we have a deep sea port, but it’s not controlled by Myanmar, that’s a problem.”
One major concern for some members of the government is what happened in Sri Lanka. In 2008, a joint venture with China began building a deep-water port at Hambantota. When Sri Lanka couldn’t repay the loan for the project, it ended up ceding the port to China for 99 years last year in exchange for debt relief.
“China is trying to influence political events in Myanmar in many ways,” Soe Win said in an interview. “But what we are afraid of is that we will end up like Sri Lanka.”
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Toe Aung Myint, permanent secretary of the Myanmar Ministry of Commerce, which oversees the project management committee, rejects the suggestion that the port would entail too much debt, saying construction would happen in stages.
“Myanmar and Sri Lanka are not the same,” Aung Myint said in an interview. “Only based on the success of the first phase, we will do another phase.”
CITIC directed questions regarding the port to the Myanmar government. “We are unable to disclose information regarding the negotiation to the public,” Zhang Yue, the head of CITIC Myanmar, said in an email.
Soe Win isn’t the only one worried about the long-term plans for Kyaukpyu. Located on the eastern edge of the Bay of Bengal, the town is almost directly opposite INS Varsha, where the Indian navy will base its new fleet of nuclear submarines.
A Myanmar government official familiar with China’s plans for Kyaukpyu said military attaches from the U.S., Australia and countries in Southeast Asia have all expressed concern that China wants to build a port that has strategic as well as economic advantages.
“China needs some sort of access or staging facilities in several different places in the Indian Ocean,” said David Brewster, a senior fellow at Australia’s National Security College and an expert on India-China maritime security. “Myanmar would be a good place to have a naval base.”
Myanmar’s government may have little alternative to a Chinese loan if it wants to build the port. The political outrage sparked in the U.S. and Europe over the treatment of the Rohingya minority has left it with few allies among developed nations.
Kyaukpyu, 400 kilometers (250 miles) north-west of the capital, Yangon, is in Rakhine state, where more than 600,000 Rohingya have been driven from their homes into neighboring Bangladesh since last August, in what the United Nations’ top human rights official has called “ethnic cleansing.” While most of the clashes happened further north, the conflict rattled investors, prompting China to send a group of diplomats to Rakhine in December.
“They wanted to learn more about the security of their investments,”said Aung Dung, 71, chairman of the Kyaukpyu branch of the NLD, who met the delegation. “The Chinese have quite a lot going on down here.”
Pipeline Links
The town already has oil and gas loading terminals, built since 2013, that feed pipelines transporting the fuel directly to Yunnan province in Western China. A rail link is planned to connect the container port.
“Kyaukpyu is definitely growing,” Yan Myo Aung, 54, chairman of Kyaukpyu branch of the Arakan National Party, whose family operates a number of local retail businesses. “We hope that the Special Economic Zone will add to that.”
Shop owner Saw Maung Nu is one of many local residents who are anticipating a windfall.
“I built this house and shop here two years ago because of the development,” said Saw, 58, a father of eight, in Thaing Shaung, a smattering of houses outside Kyaukpyu in the center of the proposed industrial zone. “I thought all the people coming to work here might need to buy things.”
He said land prices have risen from $20,000 an acre to $50,000 an acre and he’s hoping the government will pay the market rate to buy him out.
Even without the potential military benefits of Kyaukpyu, the port’s commercial advantages make it a key part of China’s maritime Belt and Road strategy.
CITIC says the terminal would have an annual capacity for 4.9 million containers, more than the current throughput of Brazil’s biggest container terminal, as well as loading oil for the pipeline. With the rail link, it would give exporters in Yunnan a short-cut to the Indian Ocean, bypassing the disputed waters in the South China Sea and the congested Straits of Malacca.
“Yunnan is very important for them, it’s landlocked,” said Soe Win. “We will be happy if they use their Kyaukpyu port as a commercial port. But if they would like to turn it into a kind of military base, then we’ll be very, very sad.”
